Brown hints at compensation for low-paid hit by 10p tax band change

Gordon Brown today gave the first hint he may compensate households which will lose out after the abolition of the 10p tax band.

Downing Street said there would be consideration given to complaints that low-income single people and childless couples would be worse off.

Mr Brown's official spokesperson today ruled out major U-turns on the grounds the Budget was a "coherent package".

When asked about single or childless people, who will be up to £350 rose off a year, the spokesman said: "These are all matters that will be addressed in the usual way in the run-up to the pre-Budget report."

Earlier today the "shop steward" of Labour MPs joined protests at the tax raid on the low-paid.

Tony Lloyd, the chairman of the Parliamentary Labour Party, urged Mr Brown not to brush aside the rebellion against the effective doubling of the 10p tax band to 20p.

He dismissed arguments that there were no significant losers and said protests were "real and deeply felt".

Mr Lloyd added: "I deeply feel them myself because I represent people who will lose in this."

The former minister also questioned Mr Brown's political strategy, saying the government needed to "clarify what it's there for".

"Gordon has got to reflect on the fact that we have not got across to the public what this Labour government is for," he said

A Labour-dominated Commons committee accused him of making "unreasonable" demands on hard-pressed households.

Sweeping changes to the tax code will leave more than five million people worse off just as they face soaring household bills.

The abolition of the 10p starting rate of tax, announced in Mr Brown's final Budget last year, means people on low incomes will see their tax bill double.

The influential Treasury Select Committee found that working couples with children on less than £8,000 a year could lose up to £446, while a single earner childless couple on less than £8,000 could lose £232.

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The report provided heavyweight ammunition for a growing rebellion against the Prime Minister's economic policies.

MPs lined up to berate him at a meeting of the Parliamentary Labour Party last Monday and some signed a Commons motion demanding changes.

Tory leader David Cameron stoked the controversy by offering to help them "stop these tax increases going through".

Mr Brown tried to limit the pain by cutting the standard rate from 22p to 20p and boosting tax credits.

But the Treasury has been forced to admit that many taxpayers will be worse off, even after credits are taken into account.

And critics say many are reluctant to apply under the complicated and disaster-ridden tax credit system.

Last night there was confusion after Labour whips spent the weekend contacting rebels to suggest a compromise might be on offer if they back down.

Fabian Hamilton, one of nearly 30 Labour MPs who signed the protest motion, said he was assured the Government was "carefully assessing the impact of the changes".

But Business Secretary John Hutton told the BBC yesterday there would be no deal. "I really don't think it is possible," he said.

Mr Hutton said scrapping the 10p rate was part of a "balanced package" which left families with children "significantly better off".

A Number 10 insider said: "We would have to rewrite the Budget and we aren't going to do that. We would also have to find up to £8billion to pay for it. No minister is suggesting a compromise."

In response, the rebels vowed to fight on. Former minister Frank Field said he would table an amendment to the Finance Bill, calling for compensation for those penalised by the changes.

The report of the Treasury select committee could now encourage other MPs to speak out.

The issue has turned into a massive political headache for Mr Brown just weeks from the first test of his premiership in the local elections.

Labour voters have deluged MPs with complaints, leaving many backbenchers fearful for their seats.

The Prime Minister is preparing to meet rebel MPs to argue that their worries are unjustified.

Government insiders say many of those identified as losers will see their incomes drop by just a few pence a week.

But evidence to the committee said those who are not entitled to tax credits - or fail to claim them - could lose out by as much as £232 a year.

The MPs' report on this year's Budget, published today, concludes: "The group of main losers from the abolition of the 10p rate of income tax seem an unreasonable target for raising additional tax revenues."

Committee chairman John McFall said: "The Government must ensure these people are identified and given appropriate help."

LibDem leader Nick Clegg called it a "defining moment" in British politics.

He said: "They are abandoning over five million of the poorest people so Gordon Brown could offer a 2p cut for the following day's headlines.

"That is an outrageous political stunt at the cost of the poorest in British society."